Energy sector at risk of being entirely dependent on imports

When gas production from local fields gradually decreases and the demand for gas increases, Bangladesh starts importing Liquefied Natural Gas (LNG) to resolve the crisis. Bangladesh has been fully dependent on the import of oil from beforehand. In recent times, Bangladesh has been largely dependent on the import of coal. If the import of gas increases in the future, there is a fear that the entire energy sector will be dependent on imports. It is only natural that this will cause the policymakers to worry. Observers, however, don't think it is logical to depend on import of gas where Bangladesh is a country full of prospects where gas is concerned. Yet Bangladesh seems to be proceeding in that direction. Now the question is, how to we come out of this situation?

It was estimated the downward trend of local gas production will continue in the coming years. Under the circumstances, import of LNG from the Middle East started at the end of 2018 to increase gas supply. LNG is a high cost commodity and it requires high cost infrastructure too. Recently the main LNG debate is about the skyrocketing prices in the global market and uncertainty of its price and instability. There is no guarantee the price of LNG will come down to a tolerable level in the global market soon or if it comes down temporarily, this will remain stable.

Why are the gas fields in Bangladesh losing production capacity? The main reason is almost all the large gas fields are very old. Generally during the normal life of a gas field, production increases at the primary stage and reaches to the peak at one stage and afterwards its production decreases and completely loses capacity. It 'waters out' which means it ends after producing water instead of gas. The largest gas field Titas reached its peak by producing 500 million cubic feet of gas daily in 2016 and afterwards the production decreased and has reached 380 cubic feet daily at present.

The production of gas decreases at the same pace or more in other old gas fields including Habiganj, Kailashtilla, Bakhrabad and Rashidpur. In these gas fields, the pressure at the gas layer and production continues to decrease. Sangu gas field in the Bay is fast depleting. Many, however, blame excess production for the reduction of pressure in the gas layer.

In Bangladesh gas is being extracted from 20 gas fields. Of these, Bibiana gas field, operated by American oil company Chevron, is comparatively new and important one. This is the only one gas field which produces 1.20 billion cubic feet daily, which is about 51 per cent of the total daily production by all gas fields in the country. How many days the Bibiana gas field will maintain its current production level is a very important matter. According to Petrobangla, the Bibiana gas field earlier for many days extracted more gas than capacity.

Chevron officials can better say about the impact of proper management on the gas field. However, many think excess extraction of gas goes against the good management and this may have a negative impact on the extraction of gas in future. Whatever happens, massive reduction in the production from Bibiana will create a catastrophe in the supply of gas in Bangladesh.

Of the total supply of gas, 18 per cent of gas comes from imported LNG as the local production starts decreasing. It can be said that the dependence on LNG will increase if the downward trend of local production continues.

Some day in the future, the import of LNG may be higher than the supply from local sources. But if the country largely depends on costly LNG, this would have a negative impact on the economy and that will not be a sustainable option. But the question is whether it is logical to depend on LNG enormously?

Bangladesh has to immediately launch serious exploration across the country to extract gas locally. Import of LNG may temporarily tackle the crisis of gas supply, but the uncertain trend of LNG prices may put additional pressure on the economy.

LNG is an easily portable costly energy which is used massively by developed countries or the countries that do not have their own energy. LNG has become energy of the most temporary and uncontrolled price due to its skyrocketing price in the global market in the recent time.

In the beginning of the year, although Bangladesh bought a unit of LNG for seven dollars from the spot market, it has to buy a unit for 35 dollars at the end of the year. Increase of LNG price by five times within a gap of several months has created confusion for Bangladesh about its import from the spot market.

Meanwhile, Bangladesh signed a long-term agreement with Qatar and Oman to import LNG at a comparatively low and fixed price (10 dollars per unit). But during the high price of LNG, these two countries displayed austerity in supply and have initiated to supply the minimum possible amount in 2022, according to media reports. They are interested in supplying LNG to the spot market at a high price rather than supplying at low price through the long term agreement.

Existence of such uncontrolled and upward prices of LNG in the future is a bad omen for the energy sector. Import of LNG for 10 dollars per unit means supplying gas at a price three times higher than from the local sources. But it does not seem the policymakers thought that the import price may be 35 dollars per unit.

As per the current estimation, import of LNG will increase due to the decrease in supply from the local sources and in some time in future, the imports may go higher than the supply from the local sources.

How long will the economy bear such a financial burden? Many gas-based power plants and factories will be shut if import of LNG is suspended temporarily due to financial pressure.

There is only one way to come out of these problems and that is very easy. Bangladesh has not taken any strong and long-term step to locally explore gas and this is why the gap between supply and demand is widening gradually. However, the scientists predict that there is a bright prospect of gas reserves in Bangladesh. This was proven when Myanmar is able to discover big gas fields through exploration after settlement of maritime dispute between Bangladesh and Myanmar in the international court in 2012.

Bangladesh did not carry out exploration in its maritime boundary. That is why there is a gas crisis in the country. In consideration of gas and oil exploration worldwide, Bangladesh is considered as the least explored area. Bangladesh has to launch serious exploration activities across the country immediately to extract gas locally. Import of LNG may temporarily tackle the crisis of gas supply, but the uncertain trend of LNG price may put an additional pressure on the economy. Gas exploration and extraction is the sustainable solution to gas crisis.

*Badrul Imam is a retired teacher of geology department at Dhaka University and energy expert.

*This article, originally published in Prothom Alo print edition, has been rewritten in English by Rabiul Islam.